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“How we think shows through in how we act. Attitudes are mirrors of the mind. They reflect thinking.” –  David Joseph Schwartz

Years ago, people used charts and simple multiplication to calculate the time value of money. Then, Hewlett-Packard introduced its ubiquitous hand-held financial calculators, and those “time value of $1” charts faded from memory. The latest incarnation is the Web-based mortgage calculator, provided online by real estate brokerages and agents, lenders and mortgage brokers and such companies as Bankrate Monitor and Nolo Press, among others. Calculators pose intriguing questions: How much can you afford to borrow to buy a home? How much will your monthly mortgage payment be? Should you refinance your mortgage? And so on.

Do mortgage calculators work? Yes and no. Calculators plug user-entered data into complex equations that would be daunting for the average not mathematically inclined person to solve by hand. However, the results lack real-world reliability and can vary from one calculator to the next. Some calculators are so suspect, in fact, that they’re accompanied by small-print disclaimers warning consumers not to rely on the results. If you want to use online mortgage calculators, keep these caveats in mind:

Mortgage calculators rarely reveal their behind-the-scenes assumptions.
Few mortgage calculators are accompanied by any explanation of how they work or what assumptions are used. Does the monthly payment include mortgage insurance, if required? Does it include an impound account for property taxes and casualty insurance? Is the equation adjusted to reflect a higher interest rate on a jumbo loan or a non-owner-occupied property? The more questions you’re asked before you click “calculate,” the more reliable the outcome is likely to be, but that’s assuming the information you enter is correct.

Mortgage calculators can’t predict payments on hybrid or adjustable-rate mortgages (ARMs) beyond the initial fixed-rate period.

The interest rate on a traditional 30-year mortgage is a fixed constant that can be plugged into an equation, but the interest rate on a hybrid or ARM is unknown beyond the first adjustment, which might occur in one month, six months, a year, three years, five years or 10 years, depending on the mortgage. There’s no way for a calculator to account for this unknowable factor. Some calculators tackle the worst-case scenario. That’s useful up to a point, but again, the reliability of the results still depends on secret internal assumptions and formulas and the accuracy of user-entered data.

Refinance calculators usually ignore the longer term on the new mortgage.
Many people refinance their existing mortgage with the goal of lowering their monthly payments. However, if you’ve been making payments on your existing mortgage for some time and the new mortgage will be amortized over a full 30 years, refinancing can cost more over the lifespan of the loan even if the monthly payments are lower. Mortgage calculators that purport to show whether you should refinance tend to focus on the monthly payment and the payback period for the refinancing costs, while ignoring the longer term of the new mortgage. This flaw is fatal.

Mortgage calculators can be fun and possibly educational.

The positive side to mortgage calculators is the ability to make rough comparisons among various scenarios. Plugging different numbers into one calculator can give novice borrowers good insights into the interplay between the cost of the home, the interest rate, the downpayment percentage and the monthly payment. But again, it’s important not to make real-world decisions solely on the basis of these numbers




“What you do speaks so loudly, that I cannot hear what you say”
– Ralph Waldo Emerson

While the Internet has proven to be an invaluable tool for any first-time home buyer, the wealth of information posted on the Net can cause a new buyer stress. The Web has countless sites that target new buyers, and all of them claim to offer the most accurate data. And what about e-mail? It’s both a blessing and a curse. E-mail is a fantastic medium, of course, for Realtors and their clients, although it can never replace the value of face-to-face communication. Where e-mail becomes problematic for new buyers is when it creates an information glut. Consumers who have been surfing the Net for information about home-buying may unwittingly find themselves placed into large databases for e-mail. These victims of “spamming” arrive home each night to as many as 50, 60 or more ads in their Inbox. And while some of them advertise legitimate businesses, just as many of them don’t.

The bottom line is that new home-buyers are deluged in a sea of information. Some of this information is presented in alarming terms, making it seem as if new buyers are up against considerable odds, and behind every corner during the real estate transaction is a disaster waiting to strike, not the least of which is mortgage-induced financial doom. Perhaps its little wonder, then, that many professionals in their late 20s and early 30s are a bit hesitant about buying, even if their finances would allow it. What is unquestionably a complex process seems that much more daunting thanks to this information glut. Which questions is a new buyer supposed to ask? What elements are critical in a residential real estate transaction? How does a buyer protect his or her own best interests?

One of the best lines of defense you’ll have during the real estate transaction is a trusted Realtor. Sounds simplistic, and yet, its so vital to ensuring that your interests are protected. Like any other field, loyalty to one’s friends is often expected in real estate, and falling victim to that burden can cost you. Consider this chapter pulled from my own home-buying storybook: When choosing a Realtor, I had the option of selecting 1) an acquaintance with 15 years of experience and an outstanding reputation, and whose services a colleague had used and praised wholeheartedly; or 2) a close friend who just eight weeks before made the decision to pursue a career change and become a Realtor. I chose Number 1, and it cost me Number 2. But when you’re a first-time buyer preparing to make the most significant financial commitment of your life, you’d better make sure you’ve got a Number 1 on your side to guide you through the process.

A question you need to ask yourself is what you absolutely must have in a home, what you’d like to have and what you can do without (but, of course, it would be nice if the home had those amenities). You’re probably going to find that as you get into your home search, that list of “must haves” is going to shrink. Nevertheless, you’ll help yourself and your Realtor save considerable time in the home-search process, so that the both of you can spend more time looking at homes that present real potential. It’s a good idea to have a discussion with your Realtor about your lists, too. Although you may not have written “extra bedroom” on your “must-have” list, your Realtor will probably advise you to choose a home, if it’s financially feasible for you, that has at least two bedrooms — mainly for resale purposes. So your Realtor can help provide you with some perspective on that list, which you may want to reorganize after your discussion.

Know What You Need And What You’ll Concede. What is essential to one home buyer may be of no value to another. Creating “need-to-have” and “nice-to-have” lists can be helpful. Your first “need-to-have” list may be very different from your final version; still, it serves as a starting point for you to discuss and decide upon those features that are the absolute essentials. For instance, public transportation to shopping areas might be a “need-to-have” if you do not own a car, while it is another person’s “nice-to-have.” If someone in your family is disabled, a one-level home with wheel chair access may be a necessary feature. However, you may decide that adding a customized ramp after the home purchase is more cost-effective. Identifying what you want and what you need helps your real estate agent pinpoint your ideal home.

If you don’t understand the mortgage process, by all means, ask for help both from your Realtor and your loan officer. If you’re a first-time buyer, “mortgage-ese” is going to sound like Greek to you, and while it’s sometimes difficult to admit your lost, the sooner you ask for help with translation to English, the better. Once your loan has been approved, closing soon follows, and you’re going to want to keep those lines of communication open among yourself, your Realtor and your loan officer during that process. It’s complex, it’s expensive, and you have a right to know what you’re signing — even if the title company representative is flying through your closing (you’re probably one of many clients that day). Don’t be afraid to ask questions before, during and after the closing. Rest assured that your questions are ones your Realtor and loan officer have heard before and are quite used to answering.

The average first-timer will have more questions than the ones raised during this article and its preceding piece, but this gives you a good starting point for moving forward with your transaction. The best insurance you have is to align yourself with a Realtor in whom you trust your future. If they have an excellent reputation and seasoned experience in your market, he or she will have the connections you need to complete the your transaction, and will stand by you during and after the home buying process. When it comes to home buying, it is, indeed, a jungle out there. You don’t need to be paralyzed with fear, but you do need to find yourself the proper Realtor and demand the answers you’re seeking. It will make the difference between a positive first-time purchase and one filled with regret.


“The greatest griefs are those we cause ourselves.”
Sophocles, Oedipus Rex

Most people decide to buy a home for very emotional reasons. Their home-owning friends are constantly talking about fix-up projects and gardening chores. Family members keep asking when the apartment dweller will be hosting a holiday dinner. Children want bedrooms of their own and a backyard for playtime. And so it goes.
Despite these emotional tugs, buying a home isn’t always a wise financial decision, according to the National Multi Housing Council (NMHC), an apartment industry organization in Washington, D.C. Ownership housing advocates naturally have an alternate view and promoting rental housing is part of the NMHC agenda; however, the group’s perspective is still an interesting one for those considering the financial ramifications of the rent or buy decision.
Such individual criteria as income, credit history, savings and lifestyle preferences determine whether a person will want to buy a home and, if so, whether he or she can qualify for mortgage financing. But the broader economic outlook for interest rates, other investments and the local housing market should be factors in the decision as well.
Interest rates obviously have a big impact on the affordability of ownership housing. Low rates such as today’s make mortgage financing costs dramatically less burdensome for homeowners and make ownership an attractive proposition in many cases. But low rates might mean the home will be less likely to appreciate in value, says Jack Goodman, chief economist and vice president of research for the NMHC. “Let’s say fixed-rate mortgage interest rates went down from 7 percent to 3 percent. A prospective home buyer might say that makes it cheaper to service a mortgage and makes the cost of homeownership less. But what caused interest rates to go down? If it is an inflation expectation, you shouldn’t be looking for as much appreciation as you might have when interest rates were higher. If it is because the economy is soft, maybe you should be thinking about whether your employment is at risk. It’s not so much that there is a right or wrong answer. It is just that there is a list of considerations,” Goodman says.
Up-front financing costs (e.g., points, appraisal fee) are a significant component of transaction costs, which should be a prime consideration in the rent or buy decision. Goodman says it is very expensive to buy, then sell owner-occupied housing and transaction costs tip the scales toward renting as a preferred option for short-duration buyers.
Another item on the list of considerations is the stock market or, more broadly, other investment opportunities. Although a house should be a home, it’s also a financial investment that ties up capital. “No one can out-guess the [stock and housing] markets over a long term, so you want to be diversified. Too [many] people put all their eggs into the homeownership basket, whereas they shouldn’t count on house price appreciation as being a source of increased wealth for them over time. In some years, house prices do better. Lately, the stock market has had a good run. The moral is that your [investments] should be diversified,” Goodman argues.
Mortgage financing increases both the risk and the possible return on buying a home, Goodman adds. “It is exactly like buying equities on margin. Using borrowed money in any investment increases the volatility,” he explains.
Finally, is the absolute cost of ownership housing an important economic factor in the rent or buy decision? While high housing costs are a barrier to ownership for some people, the price of homes may be less of a factor than the relative costs of owning or renting comparable housing in an area, Goodman suggests. He says the comparison between the costs of renting and the costs of owning must be made in each market area as another component of the rent or buy decision.


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You will remember this date forever – it’s May 2, 2011.  This is the date that will go down in history right next to September 11, 2001.  A friend of mine wrote on her weather report  “Put this date in your memory book, and then throw the key away, just so this will never escape for ever and ever.  The killer who ordered 9/11 is D-E-A-D!!!” “Yes Osama Bin Laden is DEAD – It has been confirmed.”

This is a great day for our country and for our troops, but be assured there are others in the shadows waiting to take Bin Laden’s place. Now is the time to be ever more vigilant!


In January, LinkedIn filed for an IPO (Initial Public Offering ) as did Demand Media. In February Pandora – the on line radio – filed for an IPO. Last Friday, Renren, the Chinese social networking site, also filed for an IPO in the U. S. market. Just yesterday Zillow filed for an IPO for $51.75 million. Is this a sign that the economy may start to pick up this year or does it mean these large companies are selling off stock while they still can? I guess we’ll just have to wait and see!

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